Risk Allocation, Risk Concentrations, Global & Local Coordination

Broad operational coverage challenges arise as changes occur with local deductible and coverage limits, such as: cost allocation methods, risk transfer limit changes between country\region, carrier market rate and form filings, risk\reward programs driven by SBU loss experience, and growth, acquisition and mergers, to list a few.  A captive structure, if used properly, becomes a platform to deploy strategic premium\loss retention and funding plans over varying sized capital and revenue bases of affiliate entities and strategic business units.

As organizations grow there are often clear delineating indications, most often driven by loss projections, marking when it may be time to consider formalizing a risk finance program using a captive structure.  Automobile liability, workers compensation, general liability, and property retention are the most common jump off points when considering formation of a captive structure. 

Generally speaking (but not always) long tail liability coverage lines (such as workers compensation, medical malpractice, general and products liability, home-owners warranty, environmental, employee universal life, and LTD) tend to be best suited for captive loss funding strategies. While, short-tailed and severity risks like property covers tend to be captive candidates when access to broader reinsurance capacity is necessary.  There are many examples of long tailed lines that do not make sense and short tailed lines that do make sense, it depends on each owners unique operating conditions.

The discipline and formality of a regulated and funded captive structure often results in increased organizational effectiveness to: